New rules which are designed to cut red tape for small businesses may result in a higher risk of undetected crimes, the UK’s accountant-in-chief has warned.
As of next year, businesses whose annual turnover is less than £10.2m will not have to have their accounts independently signed off by an auditor. The previous limit was £6.5m of turnover a year.
This is in an attempt to ease the regulations that companies face, as Sajid Javid, the Business Secretary, pushes for less regulation on businesses in the UK.
The government is looking into having the highest thresholds possible after a new accounting directive by the EU which looks to help small firms deal with red tape.
The Institute of Chartered Accountants in England and Wales (ICAEW) issued a warning that the decision could result in businesses being more open to fraud, inaccurate tax bills and also money laundering.
Michael Izza, the ICAEW chief executive, said: “We understand their concern is to reduce the regulatory burden on business, and this is an aim we fully support. We just believe the savings would be better made in less potentially damaging areas.”
The body represents approximately 130,000 accountants in the UK, and Mr Izza is meeting with the Department for Business, Innovation and Skills to voice the body’s fears.
The change is estimated to lift approximately 11,000 companies out of audit requirements, resulting in 98 per cent of businesses in the UK not needing to carry out a full audit.